Crown not liable for Psa3 biosecurity breach – Court of Appeal

The judgment, which overturns the High Court decision in the Strathboss class action brought by kiwifruit growers and post-harvest operators against the Crown, broadens the scope of the statutory protection provided under s 163 of the Biosecurity Act and reduces the scope of potential liability of the government sector for negligent acts or omissions.

This outcome is particularly timely given the very significant impact of the unparalleled government response to the COVID-19 pandemic and the potential for adversely affected parties to look for legal redress.

Background

The Psa3 bacteria entered New Zealand in June 2009 via kiwifruit pollen imported from China. The bacteria devastated the New Zealand kiwifruit industry. Unable to eradicate Psa3, orchards were forced to cut out a large number of their vines. Kiwifruit growers alone were said to have lost as much as $450m. One post-harvest operator, Te Puke-based Seeka, was said to have lost over $90m.

In 2014, a class action claim was brought against the Crown by 212 kiwifruit orchardists and Seeka. They jointly alleged that the negligence of Ministry of Agriculture and Fisheries (MAF) personnel – both in issuing a permit to import the pollen and in inspecting the pollen when it arrived at the border – had caused their loss, and that the Crown was therefore vicariously liable for that loss.

In the High Court, Mallon J held that MAF officers owed a duty of care in negligence to those with a property interest in the kiwifruit orchards impacted by Psa3 but not to those further removed (in this case, Seeka). Her Honour held that MAF personnel had breached this duty of care when granting the permit to import the pollen, but not when inspecting the pollen at the border.

The Crown appealed on multiple grounds, including in relation to the imposition of the duty of care. The kiwifruit growers cross-appealed on a number of grounds.

Not liable on basis of statutory immunity

The outcome of the appeal turned on whether the Biosecurity Act 1993, properly interpreted, conferred an immunity from civil proceedings that covered the MAF personnel and, by extension, the Crown. In the High Court, Mallon J considered that the immunity provisions in the Act did not extend to cover the facts of this case. On appeal, the Court of Appeal disagreed.

The Court of Appeal reconfirmed the orthodox position that the Crown cannot generally be directly liable in tort but only vicariously liable for the actions of individual Crown servants or agents. The liability of the MAF personnel depended on whether they were immune from suit under the Biosecurity Act.

If the Act did confer immunity, and the Court found that it did under section 163, then no claim could be brought against any individual Crown servant or agent and the Crown could not be held vicariously liable for their acts or omissions.

No duty of care due to concerns of indeterminate liability

Recognising, however, that there may be a further appeal, the Court of Appeal went on to consider what the position would have been if the High Court’s interpretation of the immunity provisions in the Biosecurity Act was correct. In that case, the Court of Appeal held that the MAF personnel did not in any event owe a duty of care in negligence to the kiwifruit growers (or the post-harvest operators).

The growers pleaded a duty of care was owed to them in two distinct respects:

• in relation to the decision by MAF personnel to grant and then re-issue a pollen import permit without undertaking a risk assessment (the pre-border duty), and
• in relation to the MAF personnel’s inspection of the pollen at the border (the border duty).

Both these duties were novel.

In a novel situation, the courts will undertake a two-tier enquiry to determine whether a duty of care should arise. The courts ask:

1. Proximity: is there a sufficient closeness between the parties such that the defendant should take care to avoid damage to the plaintiff?
2. Policy: despite sufficient proximity, is there any policy reason why a duty of care should not arise in this instance?

The Court of Appeal concluded that, despite sufficient proximity, no duty should arise in the case of either the pre-border duty or the border duty, due to concerns that it would expose the Crown to an indeterminate amount of future liability to an indeterminate class of persons.

In the Court of Appeal’s view, if the Crown owed a duty in either of these cases, that same duty would apply to pollen for all plant types and there was no logical reason why this duty would not be extended so that the Crown owed a duty in relation to the importation of all risk goods.

The imposition of such duties could lead to the Crown facing liability for an “immense” amount of potential losses to participants in any primary industry following an adverse biosecurity risk crossing the border. The Court highlighted the possibility of a foot and mouth disease incursion in New Zealand where the net present loss in real GDP was estimated at around $16.2b.

In the High Court Mallon J was persuaded that the concerns about indeterminate liability were sufficiently negated by virtue of the ‘liability limiting’ devices within negligence law, particularly the requirement at the proximity enquiry that the plaintiff suffer direct physical loss.

The Court of Appeal did not agree that this, or the requirement on any potential plaintiff to prove the remaining elements of negligence, were enough to dismiss the indeterminacy concern, given the scale of the potential liability that could arise from a biosecurity breach.

Deciding against a duty of care on policy grounds, the Court of Appeal highlighted the potential ‘chilling effect’ the imposition of a duty of care would have on regulatory bodies afraid of attracting liability in negligence and the ‘inevitable’ public resource re-allocation that would occur to combat this potential liability.

Other matters

Although academic given the Court of Appeal’s other findings, the Court of Appeal indicated that:

• if MAF personnel had owed a duty of care to the kiwifruit growers when deciding whether to grant the pollen permit, that duty of care had been breached because no effective risk assessment was carried out
• if MAF personnel had owed a duty of care to the kiwifruit growers when inspecting the pollen import, that duty of care had also been breached but it did not in fact cause the growers’ loss, and
• given the Court’s findings on immunity and duty in respect of the growers, the post-harvest operators’ cross-appeal had to be dismissed.

Chapman Tripp comment

In a 2007 Court of Appeal case, William Young J observed that, over the preceding 20 years, the tide had “very much gone out on negligence claims”.  While ebbs and flows can be detected over time in the courts’ willingness (or otherwise) to recognise novel duties of care, the Court of Appeal’s decision in Strathboss suggests New Zealand remains some way from the high tide mark.

Of more general application, the Court confirmed that policy factors – particularly the risk of indeterminate liability – can make it inappropriate to impose liability on public bodies for the negligent performance of their duties and functions. In this case it considered that these factors counted against the imposition of a relevant duty on the Crown.

That said, this decision is unlikely to be the last in the Strathboss saga and an appeal is expected.

Thanks to Jake Henderson for his help in writing this Brief Counsel.